After subdued gross domestic product (GDP) growth in the second quarter (Q2) of the current financial year (2018-19), widely tracked Nikkei purchasing managers’ index (PMI) provided a ray of hope for the economy.

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The country’s services and manufacturing activities grew at the highest rate since demonetisation (November 8, 2016), showed the data released by the PMI survey. This prompted the finance ministry and the Reserve Bank of India (RBI) to emphasise that the economic growth is on track.

Manufacturing and services (both private and public sectors) account for almost 74 per cent of the country’s GDP.

At 54.5 points, Nikkei India Composite PMI Output Index pointed to the fastest expansion in private sector activity since October 2016, which was a month before demonetisation was announced by Prime Minister Narendra Modi. The index stood at 53 points in October.

The RBI in its policy statement pointed out that the Composite PMI Output Index touched a two-year high of 54.5 in November. That, along with other factors, has prompted it to retain its GDP growth projection at 7.4 per cent for 2018-19, despite a muted 7.1 per cent GDP growth in Q2.

“Fastest expansion in Composite PMI Output Index in November since October 2016... PMI notes quickest pace of growth in exports in November in the last four years. Overall strong increase in business activity and in demand. Should augur well for 3rd quarter GDP growth," Garg tweeted.

Pollyanna De Lima, principal economist at IHS Markit, and author of the report, also said that the data shows the private sector will provide impetus to GDP numbers in Q3.